Hello, and welcome to the first of what is hopefully many blogs from me and the Associates of Lean FSL. The purpose of these blogs is to challenge some of the paradigms and ‘group think’ that exist around the subjects of lean and kaizen, and to try and get you thinking. We’re here to be challenged to, so we welcome all inputs to the debate. The lean community is incredibly generous with the sharing of knowledge, and in a small way we hope to contribute to this.
As there has been a lot of media interest lately in the concept of Onshoring (the bringing back of manufacturing capacity closer to home markets), I thought I start my first blog talking about it.
The Manufacturing sector has always been close to my heart, so its heartening to see that the rumours of its demise in the UK have been greatly exaggerated. It appears that the combination of factors such as wage inflation in China, uncertainty of supply, long lead times, and the cost of transportation and energy, are persuading British manufacturers to start bringing production back home. Firstly, I would argue that they were too hasty to take it Offshore in the first place, as many of these reasons to not to go were there back in the Nineties when a lot of these decisions were made. But it just seemed to become a trend that everybody had to follow. Secondly I’d say, lucky you Mr Manufacturer, that the skills and abilities required to start back up after a twenty year absence are still there (or maybe they aren’t, so now we have to train people all over again!).
But my biggest beef with the whole Offshoring argument is that it just isn’t LEAN! There’s a great quote in an FT article I was reading recently, from a gentleman called Mike Beadman – who’s chief exec of Cambridge Design Partnership – that sums up nicely why I think that Offshoring is a bad idea (with possibly the only exception being high volume, commodity type products, where demand is very, very stable). Mike says “Having your production local to your market is crucial. If your production is six weeks away by ship, then with shortfalls or peaks in demand very bad things can occur”.
When I’ve worked in the past with companies contemplating Offshoring production we did what we call the Lean Maths (or Math if your reading this in the US!). This looks at the TOTAL cost of managing the new Supply Chain, rather than just the piece part cost. Its eye-opening, when you take into account the cost of inventory, warehousing, insurance, management time, quality etc, etc. When I did this at a Spectacle manufacturer in the North of England, they were amazed to see that the UK produced lenses they were thinking of replacing with a Chinese version, were actually only 10 cents per pair more expensive when total cost was considered. As their Managing Director said at the time, for 10 cents its just not worth all the risk!
So, its great news that the tide of Offshoring is starting to reverse, and maybe the combination of energy prices and the need to be more responsive to customers changes in demand, will mean that lean thinking in Supply Chains will finally start to stick. One word of warning though, if manufacturing should be close to the customer, we might have to accept that we see our exporters moving their production to local markets, whilst seeing production of goods being bought and consumed in the UK returning home.
I’d love to hear your thoughts , is Onshoring here to stay, should the government be incentivising it to support its claims of wanting a more balanced economy?
If you want the link to the FT article that got me thinking about this I’ve pasted it in below.
Thanks,
Graham